See which workplaces made this year's list.

2026_GPTW_best-places-by-industry-Financial_Services+Insurance-Ally_Financial_Inc.

Employees say:&nbsp;"Relationships matter and carry beyond current responsibilities to previous roles—it is comforting knowing people to continue to care about others even when they aren't actively working on projects or workstreams anymore. I recently received a health diagnosis, as did my child, and the response from those I shared this with was and continues to be supportive; I've never been made to feel like this will in any way impact their assessment of me as a valued colleague or someone with less reliability. I know this doesn't seem like a big deal, but I've worked other places and heard from those I know how often this doesn't happen and how perception changes abruptly with these circumstances."

Best Large Workplaces in Financial Services and Insurance

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

America's Most Innovative Companies

This year's 100 Best Companies to Work For are rebuilding the social contract at work so people feel supported, trusted, and future-ready as they undergo that transition.

100 Best Places to Work 2026_Ally Financial Inc.

Employees say:"The culture within our team and the company broadly is one that enables and encourages people to be themselves while also pushing themselves to be even better than they were yesterday. This is done in a reinforcing and supportive way rather than being pushed/forced on people. We lift others on our team up in a non-competitive way. Everyone is treated with respect and everyone's voice is able to be heard."

Fortune 100 Best Companies to Work For

The companies on this annual list make a conscious effort to be supportive, inclusive workplaces.

2025 Best Large Workplaces for Women_Ally Financial Inc._US1__68a71ffe383bc91cadd06a8c_2

Employees say:"Ally truly cares about its employees and tries to find ways to help you when you have personal emergencies. Example: I was put on hospital bed rest a month before my twins were born. They were born 3 months early and had significant medical challenges. Ally not only made sure I kept my job in the midst of that life change, but that I had the resources I needed to get through it financially and emotionally. I will forever be grateful for the company I work for."

100 Best Large Workplaces for Women

2025_GPTW_FinancialServices_Large_Ally Financial Inc._US1__685d51ce023fa8a026342330_2

Employees say:"Ally is a uniquely great place to work because of its incredible workplace culture, where collaboration and innovation thrive. The support from both teammates and management fosters a positive and inclusive environment, making every challenge an opportunity for growth. With limitless opportunities to advance and continuously learn, Ally empowers employees to develop their skills and drive meaningful impact in their careers."

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The top companies on our list have one thing in common: Staff largely trust leadership to see them as well-rounded people and reward them for a job well done.

GPTW_100BestCompaniesToWorkFor_2025-Ally Financial Inc._US1__20241210214006_1

Employees say: "One of the things that is unique to Ally is its ownership mentality. Everyone here, regardless of level, are owners, and that makes a big difference in terms of the level of care each employee brings."

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

2025 Best Large Workplaces for Parents_Ally Financial Inc._US1__68b9ad8e7757c3af0ca2bb8e_2

Employees say:"I love working here because I feel empowered to learn while doing. We create an environment where people don't work scared. They work with a lens of curiosity which helps keep egos in check and an emphasis on sharing learnings rather than keeping them to yourself."

Best Large Workplaces for Parents

GPTW_Financial_Services_and_Insurance_Large_2024-Ally Financial Inc._US1__20240712182200_3

Employees say:"It's important to me that I work for a place that supports local community and Ally does that. I feel proud to tell others I work there because they are a large part of the Charlotte community and support many different organizations."

Industries included in the sector are banks, insurance, and real estate companies.

Fortune Sector Leaders: Financials

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

Creating a more empathetic workplace looks like staying loyal to workers, emphasizing D&I initiatives, and paying well.

100 Best Companies 2024-Ally Financial Inc.

Ally Financial, a financial services company with the country’s largest all-digital bank and an auto financing business, was not immune from inflationary forces in autos and struggles with electric vehicle sales, as it slashed <a href="https://www.charlotteobserver.com/news/business/article280772820.html">5% of its workforce</a> in October. That followed the company raising its minimum wage to $23 in the fall of 2022, which was the second increase in the span of about a year. In January 2023, Ally began including pay ranges on job postings. In 2020, Ally launched its #OwnIt equity grant program, and it has now issued over 4 million shares to employees since its inception. Ally committed nearly $1 billion to affordable housing organizations in 2023, which includes investments, grants, and loans. Starting in 2021 and continuing through 2023, Ally gave $2 million in unrestricted grants and sponsorships to 16 minority-led nonprofits across Detroit and Charlotte through its Trust-Based Philanthropy program.

The 200 companies on this list are transforming industries from the inside out.

Building a culture of trust and transparency is essential to help everyone thrive, especially in rocky economic times.

100 BEST COMPANIES 2023-Ally Financial Inc.

The digital financial services company joins the Best Companies list for the first time in 2023. 
<ul> 
 	<li>In 2022, the Ally Charitable Foundation made a pledge of $5 million over five years to the Atrium Health Foundation to help support those from underrepresented backgrounds pursue careers in health care.</li> 
 	<li>This past year, the company followed through on its commitment to provide access to capital for Black and Hispanic communities by granting $33 million in loans and investments to minority and women-led organizations, including the 22 Fund, BetaBoom, and Raza Development Fund.</li> 
 	<li>Ally offers its workers eight hours of paid time off for volunteering each year, and in total employees gave more than 28,000 hours of volunteer work in 2022. Ally will also match up to $1,000 in personal donations from each employee to eligible non-profit.</li> 
 	<li>94% of employees feel good about the ways they “contribute to the community.”</li> 
 	<li>In 2023, Ally expanded its mental health coverage. Now every employee, their dependents, and household members can access up to 16 free counseling sessions with a therapist per person annually, regardless of their enrollment in an Ally medical plan.</li> 
</ul>

The 300 companies on this list are transforming industries from the inside out.

GPTW Financial Services & Insurance Large 2023-Ally Financial Inc

Employees say: 
 
"This is truly a people-first company that treats its employees as owners and rewards as such. Ally Financial celebrates diversity, equity, and inclusion and strives to have all employees make a difference in their community outside of their working roles."

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

GPTW Financial Services Industry Large 2022-Ally Financial Inc.

Employees say: 
 
“Ally overall is a great company to work for primarily because of the people that work there and the executives at the top. The culture at Ally is very inclusive and provides ample opportunity to give back to the community. The benefits and fair pay also make this a wonderful place to work.”

To determine millennials' workplace preferences, Fortune's research partner Great Place to Work analyzed feedback representing more than 6.1 million U.S. employees.

GPTW 2022 Millennials List Large-Ally Financial Inc.

100 Best Large Workplaces for Millennials

This year’s Fortune 500 marks the 68th running of the list.

This year’s Fortune 500 marks the 67th running of the list.

Ally is one of the largest car finance companies in the U.S., providing financing and leasing for 4.5 million customers annually. The company also has an online bank, Ally Bank, and offers home loans and securities-brokerage and investment advisory services under the name Ally Invest. The stock has produced an average return of 16% over the past five years.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-273-Ally-Financial

The Detroit-based financial services company offers online banking, investing, auto finance services, and home loans.

This year's Fortune 500 marks the 65th running of the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Best Workplaces For Parents

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Best Workplaces In Financial Services And Insurance

Ally Financial is a leading digital financial service and began operations in 1919 as GMAC, a lending arm of General Motors. It then rebranded to its current name in 2010 in the wake of the financial crisis. Ally’s major divisions include dealer services, corporate finance, insurance, and digital banking. In early 2025, it began winding down its mortgage operations. Its dealer services segment is the nation’s largest bank auto finance operation, and overall Ally Bank is the largest all-digital bank in the U.S.

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Q4 2024

Ally Financial (ALLY): Company Profile, Stock Price, News, Rankings

legacy

Ally Financial

ally financial

Good day, and thank you for standing by. Welcome to Ally Financial Fourth Quarter 2025 earnings conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your touch-tone telephone. You will then hear an automated message advising your hand is raised.

To withdraw your question, please press star 11 again. Please be advised today's conference is being recorded. I will now turn the conference over to our speaker host for today, Sean Leary, Chief Financial Planning and Investor Relations Officer. Please go ahead.

Thank you, Lydia. Good morning and welcome to Ally Financial's Fourth Quarter 2025 earnings call. This morning, our CEO, Michael Rhodes, and our CFO, Russ Hutchinson, will review Ally's results before taking questions. The presentation we'll reference can be found on the Investor Relations section of our website, Ally.com.

Forward-looking statements and risk factor language governing today's call are on page two. GAAP and non-GAAP measures pertaining to our operating performance and capital results are on pages three and four. As a reminder, non-GAAP, or core metrics, are supplemental to and not a substitute for U.S. GAAP measures. Definitions and reconciliations can be found in the appendix, and with that, I'll turn the call over to Michael.

Thank you, Sean, and good morning, everyone. I appreciate you joining us today for our Fourth Quarter earnings call. Before we cover our results, I'd like to take a moment to reflect on the year. After my first full year as Chief Executive, I am grateful and optimistic. Grateful for what has been built before I joined, and optimistic for what's ahead. My optimism is shaped by the strategic refresh we undertook in 2025.

Deliberate choices backed by disciplined execution have delivered solid results. At the heart of our refresh was the focused strategy we rolled out to start the year. Focus means we are investing in businesses and segments where we have clear competitive advantages and a reason to win. That is, areas where we are unique and special. Our results validate that we are on the right path. 2025 marked a shift where results demonstrated tangible progress, including delivering on the detailed guidance we provided in January.

With that, let me recap full year performance on page five. Adjusted EPS of $3.81 was up 62% year-over-year. Core ROTCE of 10.4% was up more than 300 basis points versus 2024. Encouraging progress with room to expand further. The three drivers for sustainable mid-teens returns have been consistent, and the progress we are making is clear.

We have executed against two of the three drivers and remain positioned to deliver on the final as we progress forward. Retail net charge-offs ended the year below 2%. Importantly, we see further opportunity as we continue to benefit from vintage rollover and our dynamic approach to underwriting and servicing. Clearly, the macro will play a role in how losses materialize in any given year, but we remain confident in the direction of travel over time. Expense and capital discipline remain a top priority.

We have been and will continue to be prudent stewards of shareholder capital and make investments to position Ally for durable long-term performance, and we remain on track to deliver NIM in the upper 3% range. NIM increased more than 30 basis points in 2025 when you adjust for the sale of card.

That progress, along with embedded tailwinds across the balance sheet, gives me confidence in our ability to drive further margin expansion for full year 2026. Adjusted net revenue of $8.5 billion was up 3% year-over-year and up 6% when adjusting for the sale of card. Finally, CET1 ended the year at 10.2%. Taking into account AOCI, fully phased-in CET1 was up 120 basis points in 2025, ending the year at 8.3%.

These financial results reflect the impact of a handful of deliberate choices, including exiting non-core businesses, repositioning a portion of our investment securities portfolio as we continue migrating towards a more neutral rate position, maintaining expense discipline to create capacity for appropriate investments, while reducing controllable expenses by 1% versus 2024, and executing two credit risk transfer transactions for a total of $10 billion in notional retail auto loans, sourcing highly efficient capital.

Together, our actions have resulted in lower credit risk, lower interest rate risk, higher capital levels, a more efficient expense base, and in aggregate, a stronger foundation. And we grew in the core businesses that we want to grow with a sharp focus on risk and returns. Retail auto and corporate finance loans were up 5% in 2025 on the back of strong momentum in these core franchises.

As a result of this progress, we announced a $2 billion open-ended share repurchase authorization in December. The resumption of repurchases is not a declaration of victory, but a clear indication of the progress we've made and our confidence in the path ahead. And as we've said before, we will start low and slow with share repurchases. The opportunities for growth across our core franchises are encouraging and accretive.

Organic growth remains our priority when allocating capital. However, adding share repurchases provides another option for capital deployment as we maintain an unwavering focus on risk-adjusted returns. With that, let's turn to page six and discuss those core franchises. Execution within each of our core franchises has been strong, and momentum positions us for sustainably higher returns.

Dealer Financial Services delivered an exceptional year of performance, reflecting the benefits of our scale, the breadth of our products and services, and the depth of our relationships with our dealer customers. 15.5 million applications were an all-in record and allow us to be selective in what we originate. Given the strength at the top of the funnel, we originated $43.7 billion in consumer loans.

That's up 11% year-over-year with a 9.7% origination yield, while 43% of the volume was concentrated within our highest tier of credit quality. We continue to see opportunities for responsible growth at attractive risk-adjusted spreads based on the uniquely strong partnership we have with our dealer network. Beyond headline origination figures, I'm encouraged by the continued growth across SmartAuction and our pass-through programs, which are expected to contribute durable fee growth moving forward.

Moving to insurance, written premiums exceeded $1.5 billion, a record for Ally. Synergies between auto finance and insurance continue to strengthen our all-in value proposition and enable us to support our dealer partners across all aspects of their business. In corporate finance, we deliver a 28% ROE with strong year-over-year growth in the loan portfolio.

Managing credit risk remains a top priority, and a second consecutive year with no charge-offs reflects the strength of our underwriting. We have the benefit of being the lead agent in virtually all of our transactions, giving us the ability to own the diligence process and structure transactions appropriately. Turning to digital bank, our customer-first approach continues to set us apart. We ended the year with $144 billion in retail deposit balances, reinforcing our position as the largest all-digital direct bank in the U.S.

We saw solid growth in the fourth quarter, and on a full-year basis, balances were roughly flat. That's in line with our expectations to start the year. Our focus remains on providing best-in-class products and services to drive customer growth and retention. We now serve 3.5 million customers as 2025 marked our 17th consecutive year of customer growth.

Over time, this will continue driving a less rate-sensitive portfolio with lower average account balances. The strength and stability of what we've built is a valuable component of our enterprise. Retail deposits continue to represent nearly 90% of total funding, and 92% are FDIC insured. Before passing to Russ, I want to share a few high-level thoughts. Our core franchises are well-positioned, and their success is fueled by our strong do-it-right culture and leading brand.

I am energized by how our 10,000 teammates deliver for our customers every day and how they've rallied around the focus strategy. Our engagement scores remain in the top 10% of companies globally for the sixth consecutive year, and we were eight points higher than the industry average, demonstrating Ally's purpose-driven culture remains a key differentiator.

Our brand continues to resonate in the market and serves as a key reason customers come to Ally and want to do more business with us. Overall, 2025 marked a meaningful step forward for Ally. I'm encouraged by the progress we've made, but more importantly, I'm excited for what remains ahead, and with that, I'll turn it over to Russ to walk through the financials in more detail.

Thank you, Michael. I'll begin by walking through fourth quarter performance on slide seven. In the fourth quarter, net financing revenue, excluding OID, of $1.6 billion was up 6% from the prior year. We continue to benefit from the momentum in our core franchises, disciplined deposit pricing, and ongoing optimization of the balance sheet toward higher-yielding asset classes.

Adjusted other revenue of $550 million in the fourth quarter was down 2% year-over-year and excludes a $27 million loss as we move nearly $400 million of legacy mortgage assets to held for sale. This move reflects ongoing optimization of our balance sheet and is consistent with our focus strategy. We are taking advantage of a strong bid for mortgage credit to sell portions of our portfolio which carry more complexity and higher servicing costs.

Following the expected sale of these mortgage loans, our portfolio will be entirely first-lien fixed-rate mortgages, which will continue to run off over time. Full-year adjusted other revenue was up approximately 2%, despite the headwind from the sale of credit card and the exit from mortgage originations. Excluding that headwind, other revenue was up 5%, reflecting the momentum across our core franchises.

Diversified other revenue streams, including insurance, SmartAuction, and our Auto Pass-Through Programs, are capital-efficient and less sensitive to consumer credit cycles, positioning them to remain tailwinds into 2026 and beyond.

Fourth quarter adjusted provision expense of $486 million was down $71 million year-over-year, largely driven by continued improvement in retail auto NCOs, as well as the exit from the credit card business. The year-over-year net charge-off comparison includes $56 million of credit card activity in 4Q 2024.

The fourth quarter retail auto NCO rate declined 20 basis points year-over-year to 2.14%. Adjusted non-interest expense of $1.2 billion excludes a $31 million restructuring charge associated with a reduction in force. These decisions are never easy, but reflect our unwavering focus on balancing investments with expense discipline. Our strategic pivot has created a more focused, efficient organization, and these actions create capacity to continue investing in our core businesses in areas like cyber and AI.

Full-year adjusted non-interest expense was approximately flat year-over-year, while controllable expenses were down 1%, demonstrating our commitment to cost discipline that will continue going forward. GAAP and adjusted EPS for the quarter were $0.95 and $1.09, respectively. Moving to slide eight, net interest margin, excluding OID, of 3.51% decreased four basis points from the prior quarter, resulting in full-year NIM of 3.47%.

That is in the top half of the net interest margin guide we provided at the beginning of the year. Continued expansion of the retail auto portfolio yield and decreasing deposit costs were offset by the repricing of floating-rate exposures and lower lease yields during the quarter. Retail auto portfolio yield, excluding the impact from hedges, increased six basis points sequentially as we continue to originate above the portfolio yield.

Resilient yields, while maintaining consistent risk appetite, reflect the benefit of record application flow, enabling selectivity in what we ultimately originate. Given the forward curve, we expect the portfolio yield has peaked and will remain relatively flat throughout 2026, as lower benchmarks are reflected in originated yields. While used values were stable in aggregate, we recognize losses of $11 million on lease terminations concentrated in a subset of weaker-performing models.

Residual values on plug-in electric hybrids have been pressured following the elimination of the EV tax credit, an OEM recall, and increased OEM incentives on new models. Pressure on these models increased later in the quarter, and we'll continue to monitor trends as we move throughout Q1 and into the used vehicle selling season. Our lease portfolio mix is shifting.

About half of the leases we originated over the past two years have OEM residual value guarantees, and the leases we have originated without the benefit of residual value guarantees reflect a more diversified mix of OEMs. While we may see pressure moving forward, the ongoing remixing of the portfolio should reduce gain and loss volatility over time. Cost of funds decreased 11 basis points quarter over quarter, driven by a 12 basis points decrease in deposit costs.

Last quarter, we spoke about deposit pricing beta starting low as we began another easing cycle. Over time, we expect deposit pricing beta will increase, driving NIM expansion. We believe a through-the-cycle beta in the 60s, which we continue to expect, is sufficient to reach our high-threes NIM target. Importantly, we have strong momentum on both sides of the balance sheet from our multi-year transformation and remain confident in our path to an upper-threes margin over time.

Average earning assets on a full-year basis ended down 2%, consistent with the outlook we shared during second quarter earnings. Importantly, ending asset balances were up 2%, reflecting the growth we've seen in the places where we want to grow and demonstrating our momentum as we head into 2026. In aggregate, ending balances across retail auto and corporate finance were up $5 billion, or more than 5% year-over-year.

On a fully phased-in basis for AOCI, CET1 for the period was 8.3%, an increase of approximately 120 basis points during the year. During the quarter, we executed our second credit risk transfer of the year, issuing a $550 million note on $5 billion of high-quality retail auto loans, which generated approximately 20 basis points of CET1 at issuance. Following our announced share repurchase authorization in December, we repurchased $24 million in common stock, reflecting the low-and-slow approach we've outlined.

Moving forward, we'll be dynamic with our level of buybacks in any given quarter. We're encouraged by our ability to execute a story of "and, not or." We are prioritizing organic growth across our core portfolios while maintaining our competitive dividend, continuing to build our fully phased-in capital levels, and returning capital to shareholders through share repurchases.

At the bottom of the page, we ended the year with adjusted tangible book value per share of $40, up nearly 20% in the past year. Earnings expansion and AOCI accretion will support further book value growth over time. Additionally, we updated our calculation of core return on tangible common equity.

This new methodology does not alter our earnings outlook in any way. It improves transparency and creates alignment between returns, book value, and ultimately earnings per share. We have added incremental disclosure, clearly outlining the changes in the supplemental slides of this presentation.

In short, we have eliminated the deferred tax asset adjustment from our prior methodology to streamline calculation as well as increase transparency and comparability. As we approach our 9% management target for fully phased-in CET1, we believe this new core ROTCE metric is appropriately aligned to our mid-teens target for sustainable return.

Let's turn to slide 10 to review asset quality trends. Consolidated net charge-offs of 134 basis points were up 16 basis points quarter over quarter, driven by seasonality. We continue to see strong credit performance in our commercial portfolios, resulting in zero net charge-offs for the second consecutive year. Full-year consolidated NCOs finished below the range provided a year ago, driven by continued improvement in retail auto credit and the aforementioned strength across our commercial portfolios.

Retail auto net charge-offs of 214 basis points were up 26 basis points quarter over quarter, reflecting seasonal trends, but down 20 basis points compared to a year ago. Year-over-year improvement across all quarters of 2025 reflects the tailwind from vintage rollover dynamics and the benefit of enhanced servicing strategies.

Our full-year retail auto net charge-off rate was 1.97%, below the bottom end of our guide and notably below the 2% mark we referenced as a key pillar to achieve our mid-teens return target. Moving to the top of the page, 30-plus all-in delinquencies of 5.25% were down 21 basis points from the prior year, marking the third consecutive quarter of year-over-year improvement on an all-in basis.

This continued improvement further reinforces our constructive view on the near-term loss trajectory within our portfolio, but we remain mindful of the macroeconomic environment, particularly the labor market and used vehicle values. Turning to the bottom of the page on reserves, consolidated coverage decreased three basis points this quarter to 2.54%, while the retail auto coverage rate remained flat at 3.75%. Our retail auto coverage levels continue to balance favorable credit trends within our portfolio against macroeconomic uncertainty.

Moving to slide 11 to review auto segment highlights. Pre-tax income of $372 million was lower year-over-year, primarily driven by lower commercial balances, lease mix dynamics, and reserve build and higher servicing-related expenses given growth in the retail portfolio. On the bottom left, we've highlighted the trajectory of retail auto portfolio yields. Excluding the impact from hedges, yields were up 6 basis points quarter over quarter and 18 basis points year-over-year.

Our scale and record application volume led to another strong quarterly vintage with attractive risk-adjusted spreads. Fourth quarter originated yield of 9.6% was down quarter over quarter, but demonstrated resilience given the move in underlying benchmarks. Our ability to actively calibrate our buybacks with the evolving market supports risk-adjusted returns through the cycle.

On the bottom right of the page, $10.8 billion of consumer originations were up 6% versus the prior year period and were enabled by the 10% increase in application volume that we saw. Our established dealer relationships and full-spectrum approach enabled this accretive growth despite headwinds. Last year, we faced elevated competition, significant pull-forward demand in Q2 and Q3 tied to tariffs and EV tax credit expiration, and fourth quarter new light vehicle sales that were down more than 5% year-over-year.

Record application volume throughout the year has supported our ability to remain selective, driving accretive growth while also providing opportunity to monetize declined applications through our pass-through program. Turning to insurance on slide 12, core pre-tax income was $89 million, roughly flat year-over-year. Total written premiums of $384 million were also relatively flat versus 2024, while insurance losses of $111 million were down $5 million year-over-year.

Insurance provides a durable, capital-efficient revenue source and remains a key driver of our long-term growth strategy. As Michael noted, we continue to leverage synergies with auto finance to drive momentum within the business and deepen our all-in value proposition as we support our dealer partners in all aspects of their business. Turning to corporate finance on slide 13, the business delivered another strong quarter with core pre-tax income of $98 million.

Fourth quarter ROE of 29% and a full-year ROE of 28% underscore the strength of the franchise and the durable, accretive profile of the business as we continue to look for growth opportunities within the markets we compete in. On a year-over-year basis, we grew the portfolio by just over $3 billion. Spot portfolio balances can move considerably given the timing of new deals, paydowns, and capital markets activity.

Taking a step back, the portfolio has grown at an eight% CAGR since 2022, reflecting the disciplined approach that continues to guide our growth philosophy and is reflected in the credit characteristics of the portfolio. 2025 marked a second consecutive year with no new non-performing loans, while criticized assets and non-accrual loan exposures were 10% and one% of the portfolio, remaining near historically low levels.

Leveraging long-standing relationships with key partners in the industry remains critical to maintaining our culture of strong risk management. I will discuss our financial outlook on slide 14. We expect full-year NIM between 3.6% and 3.7%. The range for NIM reflects the evolving path of interest rates as the Fed easing cycle continues, with two cuts assumed for 2026. As we have consistently messaged, we are liability-sensitive over the medium term and asset-sensitive in the very near term.

We'd expect early beta to drive a relatively flat margin through 1Q, but given current trends on lease residuals, we expect NIM to be slightly down on a sequential basis. Looking beyond 1Q, we remain confident in NIM migrating to the upper threes over time, supported by continued optimization on both sides of the balance sheet. Deposit repricing and continued remixing of the balance sheet towards higher-yielding assets will support margin expansion.

In aggregate, retail auto and corporate finance are expected to grow in the mid-single digits, while mortgage loans and lower-yielding investment securities will continue to run off. In total, margin expansion will accelerate as deposit pricing beta increases toward our through-the-cycle target, consistent with what we observed in 2025 following Fed easing in 2024.

Given the fourth quarter NIM of 3.51% and expectation for NIM to be down a bit in the first quarter, the full-year guide implies we expect to be approaching our upper threes NIM target exiting 2026. As a reminder, our NIM progression will be choppy on a quarter-to-quarter basis, but we remain confident in the destination. Moving to other revenue, we expect continued momentum across insurance, SmartAuction, and Auto Pass-Through Programs to drive low single-digit % growth year-over-year, which includes a roughly $25 million headwind from the loss of card fees earlier this year.

On credit, we see retail auto net charge-offs between 1.8% and 2% for the year. 2025 performance showed tangible results from the dynamic underwriting and enhanced servicing capabilities we have implemented over the past two years. Our outlook reflects a balance between continued improvement from the remaining vintage rollover with ongoing macro uncertainty.

Last year, we highlighted the continuation of existing trends across delinquency, flow-to-loss rates, and used values, provided a potential path to the low end of our guidance range. Those dynamics largely played out, and we achieved a full-year NCO rate just below the low end of our guide. This year, a continuation of these same trends would support performance around the midpoint of our guide, and achieving the lower end of the range would require incremental favorability within these drivers.

Looking beyond retail auto, we expect consolidated net charge-offs between 1.2% and 1.4%. As we have noted, we are pleased with the performance of our commercial portfolios. However, these are not zero-loss businesses, nor do we price for that, and our full-year guide assumes a return to more normalized losses.

On expenses, we expect 2026 to be up approximately 1%, with investment focused on our core franchises fueling revenue growth while also investing in areas like AI, cyber, servicing, and customer experiences. This disciplined expense management, along with top-line revenue growth, positions us for positive operating leverage this year and over the medium term. Building upon the momentum we saw throughout the back half of 2025, average earning assets are expected to be up between 2% and 4% year-over-year.

Importantly, our growth is focused on the areas where we want to grow for attractive returns: retail auto and corporate finance. Finally, we expect an effective tax rate between 20% and 22%. We are encouraged by the momentum we've established across the businesses. We have said that achieving our mid-teens return target requires: one, an upper threes NIM; two, a sub-2% retail auto NCO rate; and three, capital and expense discipline.

As Michael noted, we have achieved two of the three and see a path to achieving the third. That said, it remains a dynamic operating environment, and while reaching our targets continues to move closer, we don't feel it's prudent to call a specific quarter. We'll remain nimble and ready to pivot as the macro and competitive landscape evolves. Our focus strategy is working. I'm confident in our ability to deliver improved returns and drive long-term shareholder value. And with that, I'll turn it over to Michael for a few closing remarks.

Thanks, Russ. Before I hand it over to Q&A, I want to reiterate what we've accomplished over the past year and how that positions us for the future. First, our focus strategy has created clarity on where we will compete and how we will win. Second, we have a much stronger foundation.

Our balance sheet and risk position are stronger today, giving us greater resilience and flexibility as we move forward. Our core franchises each have relevant scale, and our refined focus has streamlined resources and strengthened our competitive positioning. Third, we are executing. That means we are operating smarter, moving faster, and delivering improved efficiency and effectiveness. Earnings growth, credit performance, and capital metrics all showed meaningful progress and momentum as we head into 2026.

Fourth, authorizing a $2 billion buyback program is an important step. Resuming share repurchases underscores the progress we've made and our confidence in our ability to execute moving forward. Finally, while we are encouraged by our progress, we remain focused on the road ahead.

There is more work to do, but I'm certain we are on the right path and excited for what's ahead as we continue to execute and deliver compelling long-term value for our shareholders. With that, I'll turn it back to you, Sean, so we can head to Q&A.

Thank you, Michael. As we head into Q&A, we do ask that participants limit yourself to one question and one follow-up. Lydia, please begin the Q&A.

Thank you. Ladies and gentlemen, as a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, simply press star 11 again. Please stand by while we compile the candidate roster. Our first question coming from the line ofRobert Wildhack with Autonomous Research. Your line is now open.

Hey, guys. Maybe just to start on the NIM, Russ, I appreciate the commentary that you gave. You said down quarter over quarter in Q1 and then sounded pretty strong on the exit trajectory. Just want to double-check that I heard that correctly. And then is there any more detail that you could give on what exactly drives the NIM sort of progression through the year and how it ramps from kind of down quarter over quarter to what sounds like a pretty strong exit rate?

Yeah, sure. Sure, Robert. Thanks for your question. I appreciate it. Yeah, when you kind of look at the quarter-to-quarter NIM dynamic between third quarter and fourth quarter last year and heading into first quarter of this year, it really comes down to mainly early beta as well as some pressure from lease terminations. And so maybe I'll start on early beta.

This is the same thing that we saw last year, right? We saw soft early beta exiting 2024 and starting 2025. And then we saw some nice catch-up in the middle of 2025 with some healthy NIM expansion. Our expectations are to see similar dynamics play out this year, right? And as I kind of get underneath what leads to that, rate cuts are beneficial to Ally over time.

And we've talked about that before, but we've also talked about near-term asset sensitivity that impacts us on a quarter-to-quarter basis. So our NIM progression is not a straight line, and we've talked about that before. And it's part of why we don't guide for NIM on a quarter-to-quarter basis. We guide on a full-year basis. The beta catch-up dynamics are strong.

The ongoing portfolio mix dynamics that we mentioned earlier are strong and give us confidence in driving meaningful and sustainable improvement both in profitability and NIM expansion. You pointed to the NIM guide at 360-370 for the year. I think as you dig in and you think about where we're starting the year, it's pretty clearly implied that we expect some meaningful NIM expansion through the course of the year.

Again, this kind of NIM expansion that looks kind of like the dynamics that we saw play out last year. And obviously, on a quarter-to-quarter basis, we could get some impacts as no doubt our expectation is there will be some kind of ongoing movement in the Fed funds rate throughout the year. But again, we feel confident in terms of the medium trajectory around NIM.

I think as you kind of dig in on our full-year NIM expectations and then where we're starting the year, I think you'll see that we expect to end the year above the high end of our guide or approaching our high threes medium-term target. The pressure from the lease side, as we mentioned earlier, it's driven by a few hybrid electric vehicle models, the plug-in hybrid models.

Those specific vehicles were impacted by an OEM recall as well as significant OEM incentives on new vehicles that came with the expiration of the EV lease tax credit. And so that's kind of what we're dealing with in terms of kind of some of this near-term NIM pressure. But again, I just reiterate our confidence in the medium term and in terms of the destination and the high threes.

That's great. Thank you. Then just quickly on credit and the retail auto coverage ratio specifically, you talk a lot about the S-Tier mix, vintage remixing, net charge-offs coming down, etc., etc. The retail auto coverage ratio, though, hasn't budged in like a year. Just curious what you think it would take for you to actually start releasing some of the reserves there in retail auto.

Yeah, it's a fair question, Robert. We get that question from time to time. We've often said when we think about our returns over the medium term, as we think about our targets, we don't include reserve releases. Those are more of an output than an input from our perspective. Our focus is on just kind of managing the credit in a prudent way in terms of how we underwrite and how we service kind of just our overall approach to the portfolio.

As I think about where our reserve is set today, it's really balancing a few things. On the one hand, we're seeing clear benefits, as you said, from vintage rollover to vintages that were originated towards the end of 2023 through 2024 and now 2025 that are clearly stronger vintages from a credit perspective than what we saw in early 2023 and in 2022, so that vintage rollover is a clear benefit.

We've made improvements to our underwriting. We've made improvements to our servicing, and we're seeing that benefit over time, and that's certainly something that we're seeing in terms of delinquency improving, strong float-to-loss rates, and also we're seeing good support from the used vehicle market in terms of used car prices and severity, so all those things are incorporated in terms of how we think about reserves.

But at the same time, we're also looking at some of the macro uncertainty out there, in particular focused on the labor market and used vehicle prices. Our current expectation is that unemployment over the course of 2026 is going to be higher than the unemployment that we saw over the full year of 2025.

And there's obviously some uncertainty around that, and that's factored into how we think about reserves as well as how we think about our forward NCO guide. And then similarly, we've got a careful eye on the used vehicle market. We're watching what we see on SmartAuction as well as in the auction lanes and very much paying attention to used car prices overall. So there are a number of things that factor in.

Ally Financial (ALLY) Q4 2025 Earnings Call Transcript

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